A Beginner's Guide to the Solow Model

Abstract

The Solow model is widely regarded as the workhorse model of the theory of economic growth. Although at one point this model was first encountered in graduate school, it has since filtered down to the intermediate and, occasionally, to the principles of macroeconomics course. Many have commented on how difficult it is to teach the Solow model to undergraduates, especially to students in the principles of macroeconomics course. The author demonstrates that under the assumption that the level of savings is autonomous, the essence of the stockflow adjustment of the Solow model becomes much easier to comprehend.

Keywords:

• depreciation
• economic growth
• investment
• savings
• steady state
• stock-flow adjustment JEL code: A22
• E10
• 040